Question

Selected data pertaining to Lore Co. for the Year 4 calendar year is as follows: Net cash sales $ 3,000 Cost of goods sold 18,000 Inventory at beginning of year 6,000 Purchases 24,000 Accounts receivable at beginning of year 20,000 Accounts receivable at end of year 22,000 What was Lore’s inventory turnover for Year 4?

Answer 1

Inventory turnover = 2 times

Working

Average Inventory calculation
Beginning balance	$        6,000.00
Ending balance	$     12,000.00
Total	$     18,000.00
Average Inventory	$        9,000.00

.

Inventory Turnover ratio
	Cost of goods sold	/	Average Inventory	=	Inventory Turnover ratio
	$     18,000.00	/	$    9,000.00	=	2.00	Times

.

Beginning balance	$          6,000
Add: Purchases	$        24,000
Less: cost of goods sold	$     (18,000)
Ending balance	$        12,000